FMCG stocks rallied on Monday, in line with the broader uptrend in the Indian stock market, after Prime Minister Narendra Modi announced reforms in the Goods and Services Tax (GST) framework during his Independence Day address.
Nestle India, Dabur, Hindustan Unilever, Britannia Industries, Tata Consumer Products and Colgate Palmolive India shares gained between 3% and 5%, emerging as the top performers on the Nifty FMCG index. The index itself advanced 1.6%.
PM Modi announced that “next-generation GST reforms” would be rolled out by Diwali (October 2025). Analysts said the proposed measures, aimed at reducing the tax burden on households, are likely to boost consumption demand and support the ongoing recovery in the sector.
Though the details of the GST restructuring have not been disclosed yet, it is expected to include rationalization of GST rates for essentials and daily item use. According to reports, the government may eliminate the 12% and 28% GST slabs, consolidating products under 5% (99% items in the 12% slab are likely to shift), 18% (90% of the products in the 28% slab to shift), and 40% (luxury and sin goods) slabs.
“We believe, the move will lead to improving consumer sentiment, spurring demand (volume pick-up), narrowing pricing gap of large organized players with unorganized players leading to formalization, improvement in market penetration (low priced SKUs will enable accessibility especially in rural markets) and premiumisation,” Centrum Broking analyst Gaurang Kakkad said.
In the quarter ended June 2025, FMCG companies witnessed sequential pick-up in volumes, while the commentary on demand was relatively more optimistic as compared with earlier. Most consumer companies were already counting on the festive season to boost demand.
Analysts believe the GST reform announcement will further improve the positive demand outlook for the FMCG sector, supported by the Central government’s focus on accelerating consumption in the economy.
Brokerage firm Motilal Oswal Financial Services believes the FMCG sector’s earnings cycle will see an upward trend. An above-normal monsoon, rural pickup with recovering urban segment, distribution expansion and steady raw material prices provide visibility on the earnings improvement in FY26.
“We believe that, in line with the earnings uptrend, the valuation will also see a rerating and will be close to the last five-year average valuation multiple,” MOFSL said.
FMCG stocks to buy
Nitin Gupta, Senior Research Analyst at Emkay Global Financial Services Ltd. said that the home and personal care categories may see limited direct benefits due to their predominant classification under 5% and 18% slabs. In contrast, food and beverage companies may see direct benefits on decrease in rates.
He expects players like Bikaji Foods International, Gopal Snacks, Nestlé India, and Dabur India to see a GST-driven demand boost.
“On relatively better execution, we prefer Godrej Consumer Products, Marico, Emami, Bikaji Foods, and Gopal Snacks. Overall, rate rationalization (to have direct and indirect benefits) is seen as a positive development for the FMCG sector, as it would foster long-term growth,” Gupta said.
MOFSL said it continues to like HUL, Godrej Consumer Products, and Marico in its consumer universe.
Centrum Broking’s top stock picks in the FMCG sector are HUL, Dabur India and Britannia Industries.
Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before making any investment decisions.
